Viable Enforcement Options

The availability of administrative relief through the administrative authorities is a unique feature of the PRC trademark enforcement system. Administrative enforcement recognizes that there are times where a party claiming trademark infringement is not driven by monetary damages, but rather a desire to halt infringing activities as quickly as possible. In this regard, administrative enforcement is a useful and effective remedy as it provides quick injunctive relief. However there are questions whether infringers treat these raids and fines as a ‘cost of doing business”.

Local administrative bodies have a wide range of powers when it comes to investigating and regulating infringement cases, including:

1. 
   questioning relevant parties;
   
2. 
   to inspect and copy relevant contracts, invoices, account books and other relevant materials;
   
3. 
   conduct on-site inspections at the site of alleged infringement; and
   
4. 
   inspect relevant articles and seal up or impound evidence of an infringement.
   

Such powers of the administrative approach can be applied for in an expeditious and flexible manner, without the need for extensive hearings or other formal procedures. They can therefore be a good way to secure evidence of infringement for use in a subsequent civil action.

Enforcing trademark rights via judicial means in the PRC tends to take longer and is more costly than administrative proceedings, but the successful party can claim damages which are not afforded by administrative enforcement unless the administrative authorities agree to assist the parties with mediation on the damages issues.

There are recent changes where local courts’ jurisdiction over IP cases has expanded. Because there are now hundreds of courts are situated all over China, with varying experience and expertise concerning trademark infringements, accordingly, the quality of the judgments varies between courts. Therefore, selection of courts for initiating litigation in China is a critical aspect of litigating in China and Chinese civil procedure rules allow a certain degree of forum shopping.

(1) Commencing the Proceedings/Evidentiary Hearings

To initiate civil proceedings, a civil action is filed with the intended court. The filed action must state: (1) the nature of the claim; (2) supporting facts; (3) evidence which will be relied on and its source; (4) witness details; and (5) details of the plaintiff. Within five days, the court forwards the complaint to the intended defendant, who must file a written defense to the court within 15 days of receiving the court’s notice (the defense period is 30 days for proceedings involving a foreign defendant who has no residence in the PRC). After receiving the defendant’s defense, the court will forward it to the plaintiff within five days of receiving it.

At this point, parties may mutually agree on a timetable for the submission of evidence to the court. In the absence of any agreement, the court will usually give 30 days from the date which the plaintiff received the defendant’s defense. Upon receiving each side’s submitted evidence, the court will forward it to the opposing parties to help the parties’ assess the strengths of their respective positions in hopes of earlier settlement. Hearings are then held whereby each party may challenge the evidence submitted by opposing parties’, but in practice the court usually takes this opportunity to question parties’ and become familiar with the dispute. The judge manages the case in an inquisitorial manner.

(2) Evidence

As the party initiating the litigation, the plaintiff must prove their case by presenting evidence to support their position. Permissible evidence includes: documentary evidence, physical evidence, audio-visual material, witness testimony, statements made by interested parties and expert opinions.

Unlike many common law countries, PRC law does not have any meaningful equivalent of the discovery procedure. Consequently parties are not required to disclose all relevant documents in their possession, custody or power, and may freely decide which documents to disclose. Although the court may act as fact finder and generally take an active inquisitorial role in proceedings, evidence is usually gathered and presented by the parties’ themselves. Evidence obtained during the course of any administrative enforcement action may also be adduced at court proceedings. Moreover, there are numerous investigative agencies, trademark agencies and consultancy firms that maintain investigative personnel and informative networks who are able to help gather and provide evidence.

However, due to the heavy emphasis that courts place on documentary evidence, important evidence should be notarized to make it harder to be challenged. Any evidence that is gathered from overseas or is presented in a language other than Chinese, must be translated, notarized, and legalized. In practice due to the timelines much of this must be done before issuing proceedings.

If the court requires further technical expertise or opinions to clarify the disputed matters, then one or more experts may be appointed by the court. More experience PRC IP courts/chambers have set panels of available experts that can be readily appointed. The parties may mutually agree on the appointment of experts, but the court will step in and appoint the experts where they cannot agree. Parties have the power to veto some experts on the basis of non-independence. Thereafter, the court will select up to five experts, but will not inform the parties of the appointments until trial, at which the experts will provide their expert opinion.

Upon further inquisition and investigation, the court will set a date for trial. At trial, both sides begin with their opening statements, which is followed by debates on specific issued selected by the court. Parties then present their arguments supported with evidence. If expert evidence is adduced, the expert may be cross-examined by the parties or the judge.

If the court considers that additional hearings are necessary, then it may adjourn the trial, during which it may conduct its own investigations. Throughout and upon the conclusion of the hearing(s), before judgment is handed down, the court may ask parties whether they wish to settle their dispute . As such, the court is very much involved with assisting settlement efforts. If parties are able to agree on settlement, the case may be settled outside of court whereby their case is withdrawn and their settlement agreement is endorsed by the court. Any agreement endorsed in such a manner is enforceable as if it were a court judgment. However, if parties cannot settle, the court will deliver its judgment.

If the case only involves PRC parties, the case is expected to conclude within six months. However, extensions are possible. There are not statutory time limits if the case involves foreign parties. In practice they take a year or so.

Parties may generally appeal the judgment of the first instance Court once, and the appeal may involve a review of both law and fact. The judgment of the appellate court is final. However, if the Supreme People’s Court or a higher court finds an error in the final judgment, a retrial of the case may be conducted.

With many trademark infringements, the trademark owner’s utmost priority is to stop the infringing activities rather than to recover monetary damages. An interested party may consider first filing a preliminary injunction against the trademark infringers since final judicial orders may not be enforceable until a substantial amount of time has elapsed.

An application by an interested party must be filed with written documents specifying: (1) the parties and their basic particulars; (2) the specific details and scope of the application; and (3) the reasons for the application, including a specific explanation on how failure to immediately halt the action or infringements in question would cause irreparable damage to the rights and interests of the interested party. To support such an application, the following evidentiary documents must also be filed as well: (1) proof of the interested party’s stake in the action; (2) evidence to prove that the respondent has carried out or is about to carry out infringing activities which violate the applicant’s rights; and (3) the applicant must provide security for the action, otherwise the court may reject the application.

A decision on an application for injunction will be made within 48 hours if the court is satisfied that sufficient evidence has been presented. In practice, the actual time frame varies from court to court and from case to case, depending on a multitude of factors. If the injunction is not approved, the applicant may reapply once for reconsideration within 10 days from the date of receiving the ruling. If the injunction is approved, it will be executed and effective immediately. The successful applicant must institute formal proceedings within 15 days of being given the injunctive relief, otherwise the injunctive order would be vacated. If formal proceedings are commenced on time, then the injunctive order can last until the conclusion of the case at the court of first instance.

(c) Criminal Enforcement

The following trademark activities are considered criminal in the PRC:

1. 
   Using a trademark identical to a registered mark on the same type of goods without authorization;
   
2. 
   Selling goods knowing that they bear a counterfeit registered trademark; and
   
3. 
   Making or selling counterfeit labels.
   

Criminal proceedings are brought before the courts by filing a bill of indictment of the People’s Procuratorate, along with any supporting documents or evidence. However, before initiating any criminal proceedings, it is crucial that the interested party gathers sufficient evidence as the court will examine the materials, complaints and any other information they have obtained to determine if any criminal responsibility is involved. If the court is convinced there exists criminal responsibility, then they will initiate their own fact finding investigation, otherwise the court will simply dismiss the case.

If the case proceeds to investigation, then the public security organ will conduct a criminal investigation in order to locate the criminal perpetrator. However, the time limit for holding a suspect is two months. If a case cannot be concluded within that time limit, then the time period may be extended by one month with the approval of the People’s Procuratorate, otherwise the case is dismissed. As such, criminal investigations are likely to conclude within half a year depending on the complexity of individual cases.

d. Customs Enforcement

As a fourth method of trademark enforcement, parties may rely on customs enforcement agencies to halt the flow of infringing goods. China produces countless low-labor-cost counterfeit goods and is the largest exporter in the world – large numbers of infringing goods are guaranteed to reach the borders for export purposes.

The PRC General Customs Administration is the national authority responsible for the enforcement of intellectual property rights at the borders (“Customs”). In order to utilize PRC Customs, the trademark must first be registered with the PRC Trademark Office. Companies should also record their trademark with Customs so that enforcement personnel are more familiar with a company’s trademark, allowing them to more readily recognize the mark during random checks. Additionally, Customs is empowered to detain goods they suspect to be infringing if the trademark is recorded with Customs.

In order to record a trademark with Customs, a written application must be submitted to their main office in Beijing. The application must contain the following information and documents:

1. 
   An applicant company’s business license (if trademark holder is a company) or a photocopy of the applicant’s identity card (in the case of a trademark holder being an individual);
   
2. 
   A photocopy of the trademark’s registration certificate;
   
3. 
   Sample photographs of the applicant’s goods showing the trademark and relevant packaging, if applicable;
   
4. 
   Evidence of a known import or export of infringing goods, if known or applicable;
   
5. 
   Other documents or evidence that PRC Customs considers necessary or may specify (but in practice, such documents are not required).
   

Whenever a trademark owner suspects that infringing goods are about to exit or enter the PRC, the mark owner can submit a written application to Customs detailing the suspected point of entry or exit. The application must include the following information: (1) name of the trademark holder and relevant documents proving such trademark rights; (2) name of suspected consignor or consignee of infringing goods; (3) any relevant information to the suspected goods; and (5) sufficient evidence to prove infringement.

However, due to the arduous difficulties in obtaining such information, most Customs enforcement does not happen this way and is initiated by Customs themselves, as described below.

(2) Enforcement Commenced by Customs

Provided that a company has recorded their trademark with Customs, local enforcement may also detain goods on their own accord during random checks. Due to the difficulties of obtaining information on the flow of infringing goods, most customs enforcement takes place in this manner.

If Customs comes across infringing goods during random checks, enforcement officers will contact the person provided in the relevant recordal application. Subsequently, the contacted person must within three working days, apply for border enforcement and pay a bond as follows: (1) a bond equivalent to the value of the goods if the goods detained is valued less than RMB20,000; (2) a bond equivalent to 50% of the value of the goods but not less than RMB20,000 if the goods detained is valued between RMB20,000 and RMB200,000; or (3) a bond equivalent to RMB100,000 if the value of the goods detained exceeds RMB200,000.

After detaining the goods, Customs will investigate whether the goods are infringing within thirty working days and will confiscate them if it determines the goods are infringements or counterfeits. If Customs cannot make a determination, it will notify the trademark holder. In such a case, the notified trademark owner should apply to court for determination of infringement and also obtain an evidence preservation order to continue to hold the goods, otherwise Customs must release the goods.

Hong Kong’s civil justice system was first developed during British colonial rule, and as such it follows a common law regime. Although Hong Kong has been reintegrated as a special administrative region of the People’s Republic of China since 1997, it retained its common law legal system and continues to operate much as it did prior to 1997. However, in 2009, it significantly overhauled its civil litigation procedures by implementing the Civil Justice Reform (“CJR”).

The CJR was implemented to adjudicate disputes in court more expeditiously and economically by requiring parties to more clearly define their contentions from the outset, adhere to stricter timetables during a case’s progression and promote settlement whenever possible. These aims are mainly achieved with the introduction of the underlying objectives (“Underlying Objectives”), which are considered by the courts when making any decision.

1. Court System and its Hierarchy

Hong Kong’s court system is arranged in a three-level hierarchy, starting with the Court of Final Appeal at the top, then the High Court (which consists of the Court of Appeal and the Court of First Instance) and then the District Court⁵. The Court of Final appeal has appellate jurisdiction over matters arising out of the High Court, and the Court of Appeal has appellate jurisdiction over the Court of First Instance and the District Court.

A case is first brought in either the Court of First Instance, or the District court depending on the nature of the case and the pecuniary amount involved. The District court has jurisdiction to hear monetary disputes of values between HKD$50,000 and HKD$1 million. The Court of First Instance on the other hand, has unlimited jurisdiction and may act as an appellate court to cases emanating from the specialized tribunals.

The rules of civil procedure and the litigation process in the High Court and District Court are governed by the Rules of the High Court (“RHC”) and the Rules of the District Court (“RDC”) respectively, both of which are largely similar. Civil procedure in the Court of Final Appeal is governed by the Rules of the Court of Final Appeal and each of the lower specialized tribunals are governed by their own respective tribunal rules.

Hong Kong’s revised civil procedure rules now includes an additional set of considerations known as the Underlying Objectives which the court will apply and give effect to whenever exercising its powers. The Underlying Objectives place a positive burden on parties and their legal representatives to actively assist the court in furthering the Underlying Objectives.

The six Underlying Objectives are:

1. 
   increasing the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;
   
2. 
   ensuring that a case is dealt with as expeditiously as is reasonably practicable;
   
3. 
   promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings;
   
4. 
   ensuring fairness between the parties;
   
5. 
   facilitating the settlement of disputes; and
   
6. 
   ensuring that the resources of the Court are distributed fairly.
   

Both civil proceedings in the Court of First Instance and the District Court are initiated by filing one of the following documents with the court’s respective registry: (a) writ of summons; (b) originating summons; (c) originating motion; or (d) petition. The more commonly used methods of commencement are the writ of summons and originating summons. However, the originating summons is usually only appropriate when there is unlikely to be any dispute of fact or the disputed issue is one of interpreting legislation or a law. In contrast, originating motions and petitions are very specialized and are only used where the law expressly requires so.

Every writ must be endorsed with a statement of claim, which includes a concise statement of the claim together with the facts relied on and the relief sought. Furthermore the writ must be filed together with a statement of truth at the Registrar. After filing, the writ, an acknowledgement of service form and a Form 16 must be served together by the plaintiff on the defendant. They may be served personally, by registered post, or by inserting it in the defendant’s letterbox; where the defendant is a limited company, service is achieved by leaving the writ at or sending it by registered posted to the company’s registered office.

(2) Acknowledgement of Defense/Counterclaims/Default Judgment

A defendant who receives the writ must fill out the accompanying acknowledgement of service form to indicate whether he/she intends to defend the action and file it with the Court Registry within 14 days of service. Failure to file the acknowledgement of service form on time, allows the plaintiff to file for default judgment. If the defendant wishes to defend the allegation, then a statement of defense and a statement of truth must be filed with the Court Registry within 28 days after the time limit for acknowledgement of service expires; a counterclaim should be filed concurrently with the statement of defense, if applicable.

Furthermore, since the CJR’s implementation, it is no longer sufficient for a party to rely on bare denials in response to a plaintiff’s allegation. Denials in a defense must be backed by substantive reasons as well as setting out the defendant’s version of the case. This requirement helps discourage vexatious litigation by setting out disputable issues early on, so that merit-less arguments are less likely to be relied on by defendants.

b. Statement of Truth

With the implementation of the CJR, all pleadings, witness statements, and expert reports must be accompanied by a statement of truth, which is a declaration that the facts or opinions stated in the relevant document are true and are an honestly held belief. The statement of truth is signed by the person making the statement, but where a party is a corporate body or a group of persons, it must be signed by a person holding a senior position within that group.

If the statement of truth cannot be verified, then the relevant document it was supporting risks being struck out or held inadmissible in evidence. Moreover, anyone who makes a false statement in a document which is verified by a statement of truth without honestly believing the statement, risks being liable for contempt of court.

c. Discovery

The discovery process ensues with the close of pleadings, whereby parties involved must produce to each other documents within their possession, custody or power which are relevant to the issue being contested. Parties may also apply for further discovery on specific issues, though the Court has discretion on whether to grant such an order. After all such disclosures, both sides must allow other parties to inspect the actual documents.

Discovery is an ongoing obligation that never ceases, and is designed to assist all parties in assessing the strengths and weaknesses of their cases before trial.

d. Case Management Conference

Within 28 days of the close of pleadings, each party must serve a timetabling questionnaire on the other party (parties). The questionnaire’s purpose is to help the Court and parties involved to review the progress of the case.

Parties must then file a case management summons within 14 days of receiving the timetabling questionnaire from the other party (parties). The Court will then set down a date for a case management conference. Seven days prior to the conference, the parties must submit a listing questionnaire which details time estimates for their opening submissions, evidence-in-chief, cross-examination, and closing. During the case management conference, the Court will determine the timetable for future pre-trial reviews or trial.